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Discontinued Operations
 6 Months Ended
Jun. 30, 2023
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
Note 3 — Discontinued Operations
In March 2023, Cleco Holdings’ management, with the support of its Board of Managers, committed to a plan of action for the disposition of the Cleco Cajun Sale Group, with a sale probable and subject to customary regulatory and Board of Managers approvals. As a result, Cleco Holdings’ management determined that the criteria under GAAP for the Cleco Cajun Sale Group to be classified as held for sale were met and will represent a strategic shift that will have a major effect on Cleco’s future operations and financial results. Therefore, the results of operations and financial position of the Cleco Cajun Sale Group are presented as discontinued operations, and the financial information for historical periods
provided in this report has been recast to reflect this presentation. Certain expenses incurred by the Cleco Cajun Sale Group as a result of common services provided by Support Group are reflected in Cleco’s results of continuing operations due to the expected ongoing nature of those expenses. In addition, revenue recognized by Cleco Power from transmission services provided to the Cleco Cajun Sale Group is no longer eliminated upon consolidation of Cleco's financial statements and is reflected in Cleco’s results of continuing operations due to the expected ongoing nature of these services.
In February 2019 in connection with the approval of the Cleco Cajun Transaction, Cleco made commitments to the LPSC that included the repayment of $400.0 million of Cleco Holdings’ debt by December 31, 2024. Proceeds from the divestiture of the Cleco Cajun Sale Group must be used to satisfy the LPSC commitment. At June 30, 2023, $132.3 million of that debt remains outstanding. Interest expense on that debt is included in discontinued operations.
As a result of Cleco’s determination that the held for sale criteria for the Cleco Cajun Sale Group were met, Cleco determined that the estimated fair value less the estimated cost to sell the Cleco Cajun Sale Group was less than the carrying value of the Cleco Cajun Sale Group. This resulted in an impairment charge of $96.0 million in the first quarter of 2023 and an additional impairment charge of $20.0 million in the second quarter of 2023. The impairment charges reduced the carrying value of the Cleco Cajun Sale Group to its estimated fair value less estimated cost to sell. The additional impairment charge was primarily due to changes in assumptions related to the expected sale proceeds and closing date. The impairment charges are recognized in Loss from discontinued operations, net of income taxes on Cleco's Condensed Consolidated Statement of Income. The estimated fair value was based on a weighted average of potential sale scenarios that were determined through the income and market approaches. The fair value estimates involved a number of judgments and assumptions including the future performance of the Cleco Cajun Sale Group through the expected divestiture date, the expected sale proceeds and the timing of such proceeds, replacement interconnection value, and the weighted average cost of capital or discount rate. The fair value measurement of the Cleco Cajun Sale Group is classified as Level 3 in the fair value hierarchy.
The following table presents the amounts that have been reclassified from continuing operations and included in discontinued operations within Cleco’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2023, and 2022:
FOR THE THREE MONTHS ENDED JUNE 30,FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)
2023202220232022
Operating revenue, net
Electric operations$123,462 $126,089 $232,223 $229,722 
Other operations26,469 36,712 61,182 72,324 
Operating revenue, net149,931 162,801 293,405 302,046 
Operating expenses
Fuel used for electric generation23,548 18,954 111,147 (84,134)
Purchased power47,962 95,522 108,587 163,630 
Other operations and maintenance23,945 21,942 47,313 41,000 
Depreciation and amortization502 21,929 15,015 43,819 
Total operating expenses95,957 158,347 282,062 164,315 
Operating income53,974 4,454 11,343 137,731 
Other (expense) income, net(3)(4)131 84 
Interest, net(1,924)(1,085)(3,710)(1,951)
Loss on classification as held for sale(20,000)— (116,000)— 
Income (loss) from discontinued operations before income taxes32,047 3,365 (108,236)135,864 
Federal and state income tax expense (benefit)7,775 33,103 (30,337)35,050 
Income (loss) from discontinued operations, net of income taxes$24,272 $(29,738)$(77,899)$100,814 
The following table presents the assets and liabilities of the Cleco Cajun Sale Group that have been reclassified as held for sale within Cleco’s Condensed Consolidated Balance Sheets as of June 30, 2023, and December 31, 2022:
(THOUSANDS)
AT JUNE 30, 2023AT DEC. 31, 2022
Cash, cash equivalents, and restricted cash equivalents$4,082 $10,567 
Accounts receivable61,986 60,750 
Fuel inventory, at average cost95,147 33,153 
Materials and supplies, at average cost34,790 34,195 
Energy risk management assets42,752 106,164 
Property, plant, and equipment, net637,165 650,936 
Prepayments20,515 23,601 
Intangible assets - other32,569 36,548 
Other assets20,991 23,620 
Loss recognized on classification as held for sale(116,000)— 
Total assets held for sale - discontinued operations$833,997 $979,534 
Accounts payable$52,455 $60,586 
Deferred lease revenue19,945 22,246 
Intangible liabilities12,695 13,956 
Asset retirement obligations45,212 63,725 
Other liabilities15,347 10,056 
Total liabilities held for sale - discontinued operations$145,654 $170,569 

Cleco has elected to present cash flows of discontinued operations combined with cash flows of continuing operations.
The following table presents the cash flows from discontinued operations related to the Cleco Cajun Sale Group for the three and six months ended June 30, 2023, and 2022:

FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)
20232022
Net cash (used in) provided by operating activities - discontinued operations $(2,454)$2,865 
Net cash used in investing activities - discontinued operations$(4,031)$(2,839)